CONSOL Energy R&D – Steven Winberg, Vice President – Global CCS Institute Regional Meeting Washington DC – January 2012

Global CCS Institute

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Steven Winberg Vice President CONSOL Energy R&D January 19, 2011

Topics

• Summary of CONSOL Energy Inc.

• Global Energy

• Climate Goals

• Path Forward

• CCUS Challenge

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About CONSOL Energy • Founded in 1864

• $5.2 billion revenue

• Member – Fortune 500; S&P 500

• Largest underground coal producer in the U.S.

• Largest natural gas producer in Appalachia

• 12 active mining complexes in four states, including the largest underground mines in the world

• 4.4 billion tons of proven and recoverable coal reserves

• 6 natural gas operations across the U.S., spanning 7 states, with a net total of 12,500 wells

• Private R&D facility working with U.S. DOE and others on advanced technology for coal and natural gas production and utilization

• Over 9,000 employees

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Topics

• Summary of CONSOL Energy Inc.

• Global Energy

• Climate Goals

• Path Forward

• CCUS Challenge

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View on Energy

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There is no Global energy crisis • Energy resources are widely distributed across the globe

• Coal 120 years

• Oil 174 years

• Natural Gas 112 years

• Affordable energy is available

• Our past energy “crises” were political maneuvering and/or regulatory missteps

There is a Global energy distribution crisis • Billions of people are suffering from lack of energy

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Topics

• Summary of CONSOL Energy Inc.

• Global Energy

• Climate Goals

• Path Forward

• CCUS Challenge

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View on Climate Goals

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Solving the energy distribution crisis creates challenges with climate aspirations

• Developing countries are on an energy growth path that likely will accelerate • Many of the global climate goals do not appear to be achievable

• Blue Map • 450 ppm • Obama goals

• Fossil energy will continue to play a prominent role beyond 2050 • It took 130 years to build the existing electricity infrastructure – Completely turning

it around in 20 - 40 years does not appear practical

There is a lot of money betting on the developed/developing economies reducing GHG emissions

• That money will not go away • Alternative energy sources need higher energy prices to compete

Without CCS, there is no meaningful reduction in CO2 emissions but….. CCS is too expensive in this market.

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Coal 45%

Gas 23%

Nuclear 20%

Hydro 7%

Wind 2%

Other 2%

Biomass 1% Current

Obama’s Clean Energy Standard

This coal must have ~90% CCS

Coal 20%

Gas 35%

Nuclear 23%

Hydro 7%

Wind 6%

Other 4%

Biomass 5%

With CES

Source: National Mining Association

CES mandates 80% of electricity from “clean” sources by 2035.

Natural gas gets ½ a “clean credit”

EIA forecast: • Coal generation decreases by 46%

• Natural gas increases by 30%

• CO2 emissions reduced by more than 50%

• Average electricity price increases by 29%

But what if…. • Wind only doubled and nuclear stayed at

20% or biomass did not grow or “other” did not materialize?

• And gas took up the 5% slack

• THERE IS NO ROOM FOR COAL, WITHOUT ALSO EMPLOYING CCS ON NATURAL GAS

Global CO2 emission (power generation) relative to the 2009 fuel mix in the New Policies Scenario

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10

12

14

16

18

20

22

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2010 2015 2020 2025 2030 2035

Gt

Nuclear

Hydro

Biomass

Wind

Other renewables

CCS

New Policies Scenario

2009 fuel mix

More efficient plants

Source: IEA WEO 2011

US per Capita CO2 (eq) Emissions in 2006 vs. Obama’s 83% Reduction Goal for 2050

11 Source: EPA presentation to 2011 Pittsburgh Coal Conference

Topics

• Summary of CONSOL Energy Inc.

• Global Energy

• Climate Goals

• Path Forward

• CCUS Challenge

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Path Forward

Recognize the limitations

• Tightening federal budgets

• Industry willing to manage projects but funding is a challenge

• Low cost power market

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New Power Generation Costs vs. Current Market

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$45/MWH PJM

*34% Capacity Factor

Source : Energy Information Administration, Annual Energy Outlook 2011, December 2010, DOE/EIA-0383(2010)

Path Forward

Recognize the limitations

• Tightening federal budgets

• Industry willing to manage projects

• Low cost power market

Harvest the low hanging fruit

• Improve average fleet efficiency

• Make sure we use existing funding

• Generate revenue through EOR

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Efficiency Improvements = CO2 Emissions Reductions

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Source: World Coal Association

FutureGen Project

FutureGen 2.0 represents one of the world’s best prospects for a fully integrated near-zero emission project

• Oxy-combustion – new build or retrofit

• Minimum 90% capture on the entire plant

• CO2 pipeline network

• CO2 storage hub in deep saline formation

Positioned for success

• >$1 billion in funding firmly allocated

• Right partners with the right expertise

• Strong community support

• Liability management framework

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Topics

• Summary of CONSOL Energy Inc.

• Global Energy

• Climate Goals

• Path Forward

• CCUS Challenge

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Current EOR Market

35 – 50 Billion barrels of EOR Potential

Current EOR = 100 M bbl/yr

Current CO2 use = 115 M tonnes • 65 M tonnes new

• 50 M tonnes recycled

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Potential EOR Market

Assumptions:

1. Initial production = 100 M bbl/yr

2. Increase rate = 10%

3. Total EOR production = 45 B bbl

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Hypothetical EOR “Build-out”

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Increase Time 21 yrs Level Time 30 yrs Decrease Time 29 yrs TOTAL 80 yrs Max Capacity 41 GW Time to 10 GW 10 yrs Max Prod. .83 Bbbl/yr

Anthropogenic CO2 Sources

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* Assume 0.35 tonne CO2/bbl

CO2 Source CO2 Cost ($/tonne)

CO2 Available (MTPY)

EOR Potential * (Mbbl/y)

Cumulative (Mbbl/y)

Natural $7-30 55 158 158

NG Processing $37 10 29 187

Hydrogen $39 .2 .5 188

Refineries $39 16 46 233

Ammonia $40 4 12 245

Ethanol $42 17 50 295

Cement $81 20 59 354

Power Plants $113 1149 3,283 3,637

Coal-based CO2 demand based on shortfall in CO2 supply from non-coal sources (10%/y EOR growth, 75% utilization of EIA non-power plant CO2)

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~10 yr. Pushback

~32 GW

CO2 Value vs. Lost Power Revenue

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CO

2 V

alu

e ($

/to

nn

e)

Revenue for Lost Power ($/MWH)

0

20

40

60

80

100

120

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160

Current CO2 Cost Range

University of Wyoming Study – Oil Price vs. CO2 Price

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$28/tonne $76/tonne

$40/bbl

$100/bbl

“Pegging Input Prices to Output Prices in Long-Term Contracts: CO2 Purchase Agreements in Enhanced Oil Recovery”, Klaas van ’t Veld and Owen R. Phillips Department of Economics & Finance Enhanced Oil Recovery Institute University of Wyoming, July 2009.

Crude Oil Price

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0

20

40

60

80

100

120

1986 1991 1996 2001 2006

AEO price for WTI in 2020 ($108)

Current mkt price 1/18 ($101)

Cru

de

Oil

Pri

ce, 2

01

0 $

/bb

l

WTI spot price, FOB*

Five-year rolling average ($78)

Source: DOE NETL

Return on RD&D

Carbon Capture cost reduction creates positive return on RDD&D investment, but somewhat diminished by pace of EOR expansion

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Case 1 Case 2 Case 3 Case 4

CO2 capture cost reduction, $/tonne $ 10 $ 15 $ 20 $ 25

RD&D Cost/ $MM/yr. $ 500 $ 500 $ 500 $ 500

RD&D Duration, Yrs. 10 10 10 10

EOR production increase rate, %/yr. IRR

5.0% 8% 10% 11% 12%

7.5% 12% 14% 16% 17%

10.0% 15% 15% 17% 18%

15.0% 21% 27% 31% 35%

20.0% 28% 36% 43% 49%

25.0% 35% 46% 55% 63%

Final Thoughts…..

Fossil fuel industry needs to step back and reassess Climate goals • Focus on efficiency • Focus on remaining CCS demonstration projects

CCUS • There is not enough natural CO2 available to produce all the available EOR

potential • Natural CO2 and EOR opportunities vary regionally • CCUS has enormous potential benefits;

- Expand oil reserve base - Reduce anthropogenic CO2 emissions

• Need to better understand; - Cost of CO2 Capture - Naturally occurring CO2 cost & availability

• Need to perform RD&D to reduce cost of capture • Likely, need to consider tax credits or other government subsidies to jump

start CCUS

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Global CCS Institute

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Steven Winberg Vice President, CONSOL R&D

January 19, 2011

Questions?